Yes, it’s nice that 24 lakefront homes sold in 2014. That’s a good number, a strong number, one that we should all be proud of. We should congratulate one another, with hearty back slaps and grins, so proud of our efforts. But now that we’re done with that jubilance, let’s tell the story of 2014. Let’s talk about what happened, and more importantly, what didn’t happen. 2014 was a year of stories, many stories. It was a year of life and death, but in our real estate vacuum, the entire year can be summed up in three distinct plot lines. We should talk about those now, because my back hurts not from that missing disc, but from such enthusiastic congratulatory slapping.
If you were me, and you pulled the sold 2014 inventory priced over one million dollars, you’d find 28 results. You would assume, as we could have assumed in years past, that this volume was representative of lakefront homes and lakefront homes only. In 2014, as a point of fact, only 24 of those million dollar homes were lakefront. Four were off-water homes, and in that there is our first sub story. Four buyers capable of spending over one million dollars decided, rather than wait for some entry level offering that might calm their jittery weekday nerves, they’d jump in with both feet into a land-locked vacation home. This isn’t rare, and in the history of Lake Geneva it has been done many, many times. But recently it has not been, and so the four off-water million dollar homes of 2014 are a surprise, and one worth noting as they likely pulled lakefront sales figures down, if only by that slight bit.
14 of our 24 lakefront sales closed under $2MM. That’s a high percentage for any year, but especially high in a year that found national markets booming at the $2MM+ levels. In that, our second important plot. Six homes sold between $2MM and $2.5MM, and then, the story; just a single lakefront sale between $2.5MM and $3.5MM for the entire year. This price range is where buyers can generally settle into if they desire larger frontage with a modest home, or a fancy home with modest frontage. This is the upper-bracket sweet spot of our market, as homes priced over $3.5MM perhaps average the number that we saw in 2014- three. Buyers seeking to deposit $3MM into our liquid bank should be able find something of quality in that price range, and in 2014, they were left with very few options that absolutely nobody entertained. For a while I had a contract on a $3MM house in Loramoor, but we all know how that turned out (badly).
The idea that somehow we were short of buyers in this target category would be completely flawed. There were $3MM buyers last year, just as there are now, into this new year. But faced with milquetoast inventory they opted for other things, for this same lake, but for different ideas. I sold a lot on the lake in Loramoor last fall, and that was to a buyer that would have jumped at a quality offering in that $3MM range. In the absence of built inventory, buyers will build, and I’d successfully argue that a $2MM, 110′ vacant lot + a $1.5MM new house = a sum greater than the individual pieces. As a value hunter, I like that sort of math, and plenty of buyers agree. In fact, look at the other sales on the lake, those 20 sales priced at $2.5MM or under. By my discerning eye, at least four of those homes were bought to be torn down, and two of those four have already been demolished. These weren’t $2MM buyers that are doing this, these are $4MM buyers that took matters into their own hands and will now create a home to fill their personal market void.
The other story of 2014 is one told through the lens of the upper-upper-bracket. While we had two sales in the high $3s, that of an overdone house in Indian Hills and another of a pretty South Shore Club house, we had only one sale print over $4MM. That sale was my listing and sale on Creek Lane, at pier 88. For $5.195MM, that buyer secured what is, without any doubt, the best piece of dirt (234′ and 5.3 acres) to sell on this lake in a long, long time. There’s a contract pending today on another piece of dirt that might want to consider itself a peer, that over on Snake Road, with 261′ of frontage and 3+ acres. Listed at $5.75MM, this property would like to think it’s as good as, or better than Creek Lane. The simple truth is that it isn’t, not by approximately one billion miles. It’s not in the same conversation, and the reason as to why cannot entirely be written here, but is, instead, simply understood by those who grasp the nuances of this lakefront market. I don’t just grasp those nuances, I bathe in them.
While the mid-market can claim an absence of sales based on an absence of inventory, this elite bracket can do no such thing. We had more of this extreme upper bracket inventory in 2014 than I can remember in my 19 year real estate career. We had oodles and oodles of it, and aside from some solid interest that I had in 1014 South Lakeshore ($7.95MM) and some play on the Basswood listing near $6MM, I’m not aware of any serious interest in any of these homes. This is a surprise to me. It’s no secret that upper bracket buyers like to leave their own mark on the lake, which is why we have some homes that feature 28 car garages, but it is a surprise that a buyer or two didn’t see value that’s below replacement cost and opt to buy now and enjoy now rather than buy now and enjoy two years from now. The immediacy of the built palace is a strong selling point, and we’ll see if a buyer or two decides to pounce on one of these done offerings in time to enjoy a 2015 summer at the lake. 2014 saw no such buyer.
In addition to the 24 MLS lakefront sales, there was one private sale that I’m aware of in the low $3MM range, that in the South Shore Club. There were also two vacant lakefront sales, priced at $2MM and $2.85MM. My involvement in this lakefront market for 2014 was not insignificant. Of the 26 lakefront MLS sales, I sold nine of them. That’s 35% of the lakefront business that I owned in 2014, and I’m just a kid with messy hair and a beard that was described by a client as being less than ideal, less than perfect. Which is fine by me, because perfect beards only belong on theatre actors and liquor moguls, and I am neither. Of other importance is that since the start of 2010, three homes on Geneva have sold in excess of $5MM, and I’ve now sold two of those three.
What to expect for 2015? More of the same. I see plenty of carry-over deals from 2014, and they’ll print in early 2015. While this head start is rough on my own volume numbers (I have none of these deals, very sad trombone), it’s great for the market. We’ll sell plenty of homes this year, as solid portfolio returns from 2014 combine with low interest rates to fuel buyer motivation. The big question will be that of inventory. We have entry level inventory, though not a lot. We have that holdover upper bracket inventory, plenty of it. What we don’t have is exciting $2MM to $4MM inventory, and we don’t have anything in the South Shore Club, excepting my fantastic listing on Forest Hill that I just dropped to $1.775MM. If we can add interesting inventory in the $1.7MM to $4MM range, we’ll see a repeat of 2014 in terms of volume. If we don’t add this inventory, expect prices to inch upwards as agents do their best to lure new inventory to market in the only way we know how: Promises of big money.